and engineering works designed by the Contractor, reflecting the wider scope of the Orange Book.
Contractor design
The first feature to note about the 1999 Yellow Book, distinguishing it from the Red, is, therefore, that it is a contractor‐design form of contract; under the form, the Contractor is responsible for all or most of the design.
This is also the case with the 2017 edition, the title of both editions being the same: Conditions of Contract for Plant and Design‐Build, for Mechanical and Electrical Plant and for Building and Engineering works designed by the Contractor.
Fixed price lump sum
The second important feature of both editions of the Yellow Book, which also distinguishes it from the Red Book forms, is that it is a fixed price lump sum rather than a re‐measurement contract. The Contractor's basic entitlement is to be paid a fixed price, stated in the Contract at the outset and expressed as a lump sum, subject only to adjustments or additions made pursuant to the terms of the Contract for such matters as variations or unforeseeable physical conditions.
The Engineer
The third main feature of the Yellow Book in both editions is that, like the Red Book forms, an important role is assigned to the Engineer, who performs the same functions under both Books and in the 2017 edition must also act neutrally.
Risk allocation
The fourth feature of the Yellow Book in both editions is that, also like the Red Book forms, it seeks to strike a fair balance of risk between Contractor and Employer. Many of the circumstances in which the Contractor can claim in the Red Book (for example, where unforeseeable physical difficulties are encountered) are also circumstances in which he can claim in the Yellow Book.
1.2.3 The 1999 Silver Book
Unlike the other two Books in the rainbow suite, the Silver Book 1999 was a completely new form of contract. It was introduced to meet a perceived market need for a form of contract which would give project sponsors maximum certainty as to time and budget. This need was particularly evident in Build‐Operate‐Transfer and other concession‐type projects, in which the project financing placed huge constraints on sponsors to ensure that the project was completed on time and within budget. The fair or even‐handed allocation of risk characteristic of the Yellow and Red Books was wholly unsuited to such projects. What the sponsors required was a contract form under which the contractor carried virtually all the risk and had very limited opportunities to claim.
FIDIC noted a trend for sponsors to cause the general conditions of typically a Yellow Book form to be amended to try to place as much risk as possible on the Contractor, quite often with disastrous results. To avoid this tendency, and to meet head on the demand for a new form, FIDIC introduced the Silver Book in 1999. It can be used not merely in concession‐type projects but in any case where the project sponsors require maximum certainty about time and budget.
The title of the Silver Book in both editions is Conditions of Contract for EPC/Turnkey Projects. ‘EPC’ stands for Engineer‐Procure‐Construct, and indicates the range of the Contractor's responsibilities under the Contract; the Contractor is responsible for engineering design, the full range of procurement and for construction. The Contractor designs to Employer's Requirements, which in some cases amount to little more than a performance specification although they may contain considerable engineering design.
The word ‘Turnkey’ is used synonymously with ‘EPC’ in the title of the Silver Book forms to signify that the Contractor is to provide the Employer with a complete package, so that he has the plant or other facility ‘at the turn of a key’. The Employer thus has a single point of responsibility for design, procurement and construction.
The project sponsors are provided with much greater certainty about time and cost than would be available under a Yellow Book Contract; under the form, the Contractor agrees a lump sum fixed price and has very limited scope for claiming additional time or money. The Contractor is forced correspondingly to price for risk, and therefore a Silver Book Contract can result in considerably higher project costs for the sponsors. Silver Book contracting has sometimes been called a Rolls Royce method of procurement for that reason.
FIDIC itself counsels caution when contractors are invited to tender on the basis of a Silver Book form. The guidance is to the effect that contractors ought not to contemplate contracting on such a basis unless they have had an opportunity to assess all relevant risks; something which it is difficult in practice to achieve when the tender period and available resources are limited. What often happens in practice, although this will depend on the individual contractor's bargaining power, is that the parties will negotiate exceptions to the contractor's otherwise comprehensive responsibility and, for example, identify particular items of design or information for which the contractor will not be responsible or carry the risk. Even when such exceptions might be carved out, a responsible contractor will need to exercise extreme care before deciding to contract on a Silver Book basis and will almost always have to build into the price a significant cushion against remaining risk.
There is no Engineer in the Silver Book forms, the Employer in the 1999 edition being able to administer the Contract himself, although typically he will appoint an Employer's Representative to do so on his behalf. Whether or not such a representative is appointed, any determinations made must in the 1999 Silver Book be fair, in accordance with the Contract and take account of all relevant circumstances.
In the 2017 edition of the Silver Book the Employer is obliged to appoint an Employer's Representative and so cannot administer the Contract himself. As with the 1999 edition, determinations must be fair, in accordance of the Contract and take account of all relevant circumstances (clause 3.5). In the 2017 edition there is an added requirement (also in clause 3.5) that in carrying out his determining functions the Employer's Representative shall not be deemed to act for the Employer; unlike the 2017 Yellow and Red Books, however, he is not expected to act neutrally, although whether in practice this will make much difference is not entirely clear since in all three Books in both editions determinations have to be fair, in accordance with the Contract and take account of all relevant circumstances.
A significant difference exists between the 1999 Silver Book on the one hand, and its 2017 version and both editions of the Yellow and Red Books on the other, as to the effect of a determination. In the 1999 Silver Book, each party must give effect to a determination unless the Contractor gives notice of his dissatisfaction with the determination within 14 days; he may then refer the matter to a DAB under clause 20.4. In both editions of the Yellow and Red Books, on the other hand, the parties are to give effect to the determination unless and until it is revised by a DAB/DAAB or, ultimately, arbitral tribunal. That difference could favour the Contractor in some situations where, for example, the Employer is entitled to a payment, as the Contractor can hold off paying by notifying his dissatisfaction with the determination within the 14 days. In the 2017 Silver Book, where the Employer is no longer permitted to administer the Contract himself, the position has been changed to bring it into line with the other forms, so that both parties have to give effect to a determination unless and until it is revised by a DAAB (or ultimately an arbitral tribunal).
1.3 Contractor Risk in the Silver Book: Two Examples
The following two examples may serve to illustrate how the Silver Book stands out from the other two FIDIC forms.
1.3.1 Unforeseeable Difficulties
Clause
